August 2002

Economic Update

• With the addition of 7,500 industry jobs in July, California has created an average of 1,500 nonfarm jobs each month of 2002—a total of 10,200. This is much better than the 2,200 jobs lost on average each month during 2001.
• Government and wholesale and retail trade were the only two job-gaining major industries in July. Government payrolls advanced for the tenth consecutive month with the addition of 24,000 jobs, which means that private sector employment dropped by over 16,000. Nearly all of the public sector gains came from local public schools. Seasonal adjustment factors may well be at work, as local government employment was unchanged in June—the first time in nine months that it has not grown. During July local governments added 19,100 jobs.
• Wholesale and retail trade industries turned in their second consecutive month-over-month advance in July with the addition of 6,100 jobs. Retail trade added 4,300 jobs led by eating and drinking places. Wholesale trade added 1,800 jobs.
• Losses in electronics made manufacturing the leading job loser in July—dropping 9,900 jobs for its 18th consecutive month-over-month loss. Stagnating building activity led construction industries to shed 4,300 jobs in July.
• Compared to a year ago, industry employment in California was down 35,500 (or 0.2 percent) in July. Continuing weakness in the high technology sector led manufacturing employment to fall by 83,000 over the year. Transportation and public utilities lost over 30,000 jobs.
• Government was again the year-over-year job growth leader. Since July 2001, the public sector has added nearly 74,800 jobs, with the great majority in local public schools.
• California's unemployment rate dropped to 6.3 percent in July from a revised 6.5 percent in June. The improvement resulted from a drop in the number of unemployed persons (46,000) and increased civilian employment (55,000).
• Following a burst of activity early in the year, construction in California has slowed significantly and trails last year’s pace. Residential construction, as measured by permitting activity, reached a seasonally adjusted, annual rate of 135,000 units in June, a 2 percent drop from a year ago. For the first six months of 2002 as a whole, residential construction was essentially unchanged from the same months of 2001. Regionally, home building has fallen dramatically in Los Angeles, San Diego, and the San Francisco Bay areas.
• Nonresidential construction in June, as measured by permit values, was off over 14 percent from a year ago. The slowdown is still being led by dramatic reductions in office building and industrial construction.
• Following surging sales in April and May, statewide sales of single-family homes plunged almost 14 percent in June. This represents a small 1.4 percent year-over-year gain, but is a significant reduction from the 20+ percent gains made in both of the preceding two months. Despite this drop in demand, the median price of single-family homes sold in June, $324,000, was still 21.5 percent above the median reached a year ago.  

  Home Sales Slow

Preliminary General Fund agency cash for July was $42 million below the 2002-03 May Revision forecast of $3.859 billion.

• Personal income tax revenues were $63 million below the month’s forecast of $2.078 billion. Withholding was $56 million below the month’s estimate of $2.005 billion, and refunds were $53 million above the expected level of $102 million. This shortfall was partially offset by other receipts, which were $46 million above the $175 million that was projected.
• Sales and use tax receipts were $88 million above the month’s forecast of $1.368 billion. July represents the final payment for second quarter taxable sales, which was due on July 31 and a portion of this payment is received in early August. A more complete picture of second quarter sales will be available in mid-August, when all of the second quarter receipts have been processed. The May and June prepayments were $258 million below forecast. To date, it appears that a portion of this shortfall may be offset in the final payment.
• Corporation tax revenues were $48 million below the month’s estimate of $213 million. Prepayments were $7 million above the estimate of $145 million. Other payments—which include final payments and other miscellaneous payments—were $27 million below the forecast of $112 million. Refunds were $28 million above the projected level of $44 million.
• Revenues from the insurance, estate, alcoholic beverage, and tobacco taxes came in $6 million above the $138 million that was expected. The remaining revenues—pooled money interest income and “other” revenues—were $25 million below the month’s estimate of $62 million.

General Fund Agency Cash
2002-03 May Revision Forecast

2002-03 Comparison of Actual and May Revision
Forecast Agency General Fund Revenues

For more information, please contact the California Department of Finance, Room 1145, State Capitol, Sacramento, CA or call (916) 323-0648.

Return to the Department of Finance Home Page